Establishing a Limited Liability Company (LLC) in Saudi Arabia for Foreign Investors

Foreign investors looking to set up a company in Saudi Arabia often choose a limited liability company (LLC), the most common business structure in the Kingdom. The advantages of an LLC in Saudi Arabia include the limited liability protection for shareholders, where their liability is restricted to the value of their equity stake in the company.

Key Benefits of a Limited Liability Company in Saudi Arabia

Under the Saudi Companies Law, a limited liability company (LLC) is one of the most flexible and widely used legal entities. There are two main types of LLCs:

• Private limited liability company (LLC)
• Public limited liability company

Private LLCs are more common due to the streamlined registration process with the Saudi Companies Registry. Investors should note that the Companies Law was revised in 2015 and again in 2018, bringing significant changes to how LLCs operate in the Kingdom.

Main Characteristics of Saudi LLCs:

• Separate legal personality from shareholders.
• Life of an LLC is limited by law.
• Requires at least one shareholder and one director.
• LLCs must have a regional office within Saudi Arabia.
• Foreign-owned LLCs need a special permit from SAGIA (Saudi General Investment Authority).

Requirements for Shareholders and Directors in Saudi LLCs

A Saudi LLC requires at least one shareholder, who can be either a natural person or a legal entity, and at least one director. If the company has more than 20 shareholders, a board of directors must be formed. For companies with 3 or more shareholders, a supervisory board must be established. The maximum number of shareholders is 50.

Capital Requirements for LLCs in Saudi Arabia

The capital requirements vary based on the industry and the specific legal structure:

• No minimum share capital is generally required to form an LLC.
• However, SAGIA has set a minimum share capital of SAR 1 million for licensed LLCs.
• LLCs operating in sectors such as industrial or agricultural sectors may require a minimum capital of USD 5 million (around SAR 1,333,000).

Registration Process for LLCs in Saudi Arabia (2024)

The process of establishing a limited liability company in Saudi Arabia involves several steps, starting with reserving a company name and drafting the Articles of Association. These documents are submitted to the Ministry of Commerce for approval. Once approved, the company must register with the Notary Office, and a corporate bank account must be opened.

E-Services for LLC Formation in Saudi Arabia

The Ministry of Commerce provides several online services for foreign investors to establish a company, including issuing commercial licenses, registering with the General Organization for Social Insurance (GOSI), and registering the company with the Zakat, Tax, and Customs Authority.

Required Documents for LLC Registration in Saudi Arabia:

• Articles of Association.
• Proof of shareholder identity (for foreign investors, a special permit from SAGIA is required).
• Certificate of incorporation for foreign entities.

Important Considerations for Foreign Investors:

LLCs are the preferred business structure for foreign investors due to their simplicity, flexibility, and limited liability protection. However, foreign companies must comply with specific local regulations, including obtaining the necessary licenses and permits to operate.

Conclusion:

Establishing a limited liability company in Saudi Arabia provides numerous benefits, including limited liability, flexible management structures, and access to one of the fastest-growing economies in the world. However, understanding the legal and financial obligations is critical to ensuring a successful setup.

References:

• Ministry of Commerce: Establishing a Limited Liability Company
• Amin Elsaghir: Starting a Limited Liability Company in Saudi Arabia
• Al Othman Law Firm: Establishment of LLC Company in Saudi Arabia